How teachers game the system to reap rewards for their activism

Education Next, a periodical published by the well-regarded Hoover Institute, has an article in its spring issue regarding the gold plated benefit packages enjoyed by the nation's teachers.

The teachers unions (there are two major ones) are prime benefactors of the Democratic Party and individual Democratic candidates. They also put in many hours laboring for free (well, not really, because as will be seen they benefit mightily from government largesse, but it comes out of taxpayer funds, not directly from the Democratic Party), walking around neighborhoods, knocking on doors, passing out pamphlets, manning phone banks, and serving as delegates to the Democratic National Convention. Their payoff: generous salaries, easy tenure, and outsized benefit packages that are guaranteed by the states.

Their benefits compare quite favorably to those of people laboring in the private sector.

There are several reasons one might expect employer contributions to retirement to be higher for teachers. First, nearly all teachers are covered by traditional defined benefit (DB) pension plans, in which employees receive a regular retirement check based on a legislatively determined formula. These plans have, over the years, come to offer retirement at relatively young ages, at a rate that replaces a substantial portion of final salary. U.S. Department of Education data show a median retirement age for public school teachers of 58 years, compared to about 62 for the labor force as a whole. A teacher in her mid-50s who has worked for 30 years under a typical teacher pension plan will be entitled to an annuity at retirement of between 60 and 75 percent of her final salary. In nearly all plans this annuity has some sort of cost-of-living adjustment. One does not generally observe comparable retirement plans for professionals and lower-tier managers in the private sector, since most employers have replaced traditional DB plans with defined contribution (DC) or similar 401(k)-type plans, in which the employer and employee contribute to a retirement account that belongs to the employee. Nor do those traditional DB plans that remain typically reward retirement at such early ages; they more nearly resemble Social Security, where eligibility is age 62 for early retirement, and 66 and rising for normal retirement.

The final salary for teachers are often artificially boosted to provide higher retirement benefits (it's called "gaming the system").

School districts (that is you and I) are also paying a higher percentage of employee retirement benefits than private employers do for their employees.

the rate of employer contributions to retirement benefits for public school teachers in 2008 is substantially higher than for private professionals: 14.6 percent of earnings for teachers vs. 10.4 percent for private professionals. Moreover, the gap has widened over the four years the data have been available. Between March 2004 and September 2008, the difference more than doubled, rising from 1.9 to 4.2 percentage points.

What are the likely trends going forward for the cost of teacher retirement benefits? No one knows for sure, but we can identify the two key factors that will drive these costs: future developments in the benefits themselves and in their funding. The trend through much of the postwar period was to enhance the retirement formulas in various ways, including reducing the age or service requirement for full benefits. For example, just last year New York City agreed to enhance its pension formula for younger teachers.

In a nutshell, teachers have defined benefit plans - meaning their retirement benefits are secured at guaranteed amounts. No worries about the performance of the stock market or companies that have employed them. The benefits are a legal obligation, so states must pay them no matter what happens to the economy. The funds for these payments come from our pockets. The amounts are artificially inflated by end of the career salary boosts since the retirement benefits are determined by career ending salary levels.

To cap it off, teachers retire far earlier than do most other professionals thanks to politicians who know how to butter bread with the best of them. Are these benefits akin to earmarks? Is the money that flows to Democratic politicians-and usually it is Democrat who benefit from teachers' support-just another variety of pay to play amounts?


Education Next, a periodical published by the well-regarded Hoover Institute, has an article in its spring issue regarding the gold plated benefit packages enjoyed by the nation's teachers.

The teachers unions (there are two major ones) are prime benefactors of the Democratic Party and individual Democratic candidates. They also put in many hours laboring for free (well, not really, because as will be seen they benefit mightily from government largesse, but it comes out of taxpayer funds, not directly from the Democratic Party), walking around neighborhoods, knocking on doors, passing out pamphlets, manning phone banks, and serving as delegates to the Democratic National Convention. Their payoff: generous salaries, easy tenure, and outsized benefit packages that are guaranteed by the states.

Their benefits compare quite favorably to those of people laboring in the private sector.

There are several reasons one might expect employer contributions to retirement to be higher for teachers. First, nearly all teachers are covered by traditional defined benefit (DB) pension plans, in which employees receive a regular retirement check based on a legislatively determined formula. These plans have, over the years, come to offer retirement at relatively young ages, at a rate that replaces a substantial portion of final salary. U.S. Department of Education data show a median retirement age for public school teachers of 58 years, compared to about 62 for the labor force as a whole. A teacher in her mid-50s who has worked for 30 years under a typical teacher pension plan will be entitled to an annuity at retirement of between 60 and 75 percent of her final salary. In nearly all plans this annuity has some sort of cost-of-living adjustment. One does not generally observe comparable retirement plans for professionals and lower-tier managers in the private sector, since most employers have replaced traditional DB plans with defined contribution (DC) or similar 401(k)-type plans, in which the employer and employee contribute to a retirement account that belongs to the employee. Nor do those traditional DB plans that remain typically reward retirement at such early ages; they more nearly resemble Social Security, where eligibility is age 62 for early retirement, and 66 and rising for normal retirement.

The final salary for teachers are often artificially boosted to provide higher retirement benefits (it's called "gaming the system").

School districts (that is you and I) are also paying a higher percentage of employee retirement benefits than private employers do for their employees.

the rate of employer contributions to retirement benefits for public school teachers in 2008 is substantially higher than for private professionals: 14.6 percent of earnings for teachers vs. 10.4 percent for private professionals. Moreover, the gap has widened over the four years the data have been available. Between March 2004 and September 2008, the difference more than doubled, rising from 1.9 to 4.2 percentage points.

What are the likely trends going forward for the cost of teacher retirement benefits? No one knows for sure, but we can identify the two key factors that will drive these costs: future developments in the benefits themselves and in their funding. The trend through much of the postwar period was to enhance the retirement formulas in various ways, including reducing the age or service requirement for full benefits. For example, just last year New York City agreed to enhance its pension formula for younger teachers.

In a nutshell, teachers have defined benefit plans - meaning their retirement benefits are secured at guaranteed amounts. No worries about the performance of the stock market or companies that have employed them. The benefits are a legal obligation, so states must pay them no matter what happens to the economy. The funds for these payments come from our pockets. The amounts are artificially inflated by end of the career salary boosts since the retirement benefits are determined by career ending salary levels.

To cap it off, teachers retire far earlier than do most other professionals thanks to politicians who know how to butter bread with the best of them. Are these benefits akin to earmarks? Is the money that flows to Democratic politicians-and usually it is Democrat who benefit from teachers' support-just another variety of pay to play amounts?